Abstract

Economists have long advocated congestion pricing as an efficient way of allocating scarce roadway capacity. However, with a few exceptions, congestion tolls are rarely used in practice and strongly opposed by the public and elected officials. Although high implementation costs and privacy issues are alleviated as appropriate technologies are developed, the concerns that congestion pricing will adversely affect low-income travelers remain.In this paper, we use a strategic transportation planning model calibrated for the Washington, DC, metropolitan area to compare the welfare and distributional effects of three pricing schemes: value pricing (HOT lanes), limited congestion pricing, and comprehensive congestion pricing. We find that social welfare gains from HOT lanes amount to three-quarters of those from the comprehensive road pricing. At the same time, a HOT lanes policy turns out to be much more equitable than other road pricing schemes, with all income groups strictly benefiting even before the toll revenue is recycled.

A novel approach to calculating the costs of Mexico City’s “Day Without Driving” program estimates that roughly 3 percent of the country’s GDP is spent on the program—and that the costs are disproportionately burdensome for lower-income drivers.

When consumers value both the overall level of environmental quality and their own contributions to that end, policymakers can encourage the optimal provision of public goods by incorporating pro-environmental preferences into regulatory design.